The 2009 Regular Session of the Legislature is approaching its conclusion, and it probably will not generate fond memories in the minds of most individuals. Gertrude Stein once described Oakland, California by saying: "There is no 'there' there." It is difficult at this juncture to capture the "there" in this convocation of the Legislature.
Granted, the budget shortfall usurped almost every other potential topic during the session. Trying to plug a billion-dollar-plus hole in the operating budget was acts one, two, and three of the three-act play that was this legislative session. And, as with most acting performances, there was a lot of posturing and over-playing of roles.
The current battle of the budget centers around the House that wants to make a significant amount of cuts now (believing that there is more fiscal pain coming in the next two budgets), and the Senate that feels the amount of cuts proposed by the House is too severe. The Senate wants to take a significant amount of money from the Rainy Day Fund and to increase tax revenues to supplement the budget. Many members of the House have concerns about tapping the Rainy Day Fund at this juncture and are dead set against raising taxes. The two chambers are on a collision course with only a week left in the session.
Fiscal disputes such as the current one are somewhat rare. Why? Because the Legislature usually follows the governor's lead on budget matters. Governor Jindal has been a player but not necessarily a dominant one thus far in the budget debate. Yes, he said he would not allow any taxes to become law, but that didn't stop the Senate from (illegally) trying to advance one. Perhaps that was just posturing on the Senate's part so they could appear to be funding unfunded elements of the budget and jamming the House with the issue.
But the House wasn't in the mood for a jam. In an interesting move, the House concurred with the Senate amendments to the budget instead of sending the legislation to a conference committee. The Senate then loudly protested that the House had the audacity to adopt the amended version of the budget that the Senate had sent them. (Talk about audacity!) Now the Senate is amending House bills to send more revenue raising measures back to them in order to put pressure on the House to lessen the amount of cuts in the budget that is now sitting on the governor's desk.
The clock is ticking and the outcome of the battle over the budget is still up in the air. One of two scenarios is going to prevail in some fashion: Either the House's view (serious budget cutting needs to begin now because the news only gets worse in subsequent budgets) or the Senate's plan (raise more money now and hope for better times going forward) will become dominant. The outcome could be resolved fairly quickly if Governor Jindal sold the public on exactly what he thinks the solution to the problem should be-and why. He has stated in the past that he is not for raising taxes or tapping the Rainy Day Fund (except for perhaps $50 million) to address the budget shortfall. If that is where he still is in the deliberations, a forceful statement by him would likely conclude the issue. If he has changed his mind, it is time to let the world know.
Wednesday, June 24, 2009
Tuesday, June 9, 2009
The Games People Play
Dan Juneau
A recent ruckus in the state legislature has created a lot of anger and garnered national media attention. The incident involved a sneak attack amendment that Representative Avon Honey managed to get tacked onto one of his bills. The result was a 99-0 vote in the House of Representatives for a bill that, as amended, would enact changes in Louisiana’s unemployment compensation law to be eligible for unemployment compensation stimulus money approved by Congress.
There is more than meets the eye in this maneuver. The bill that was amended was on the “consent calendar” of the House agenda. That part of the agenda is reserved for bills that are totally non-controversial and can be considered quickly in order to speed up the legislative process. The original bill pertained to changes in the workers’ compensation law—not unemployment compensation.
Placing an unemployment compensation amendment on the bill violates the “dual object” provision in the Louisiana Constitution. That provision is designed to maintain order in the legislative process by preventing bills from being hijacked willy-nilly by amending them to have more than one objective.
Essentially, Representative Honey’s last second, unconstitutional amendment to his bill on a calendar reserved for totally non-controversial bills violated the legislative process on several levels, but that was just the opening act. When the bill arrived in the Senate, another game was played when it was referred to committee.
Under the Senate’s rules, the bill should have either not been referred due to its dual object flaw or, if referred, it should have gone to the Senate Labor and Industrial Relations Committee. Instead, the bill was referred to the Senate Finance Committee, presumably under the pretext that it has an impact on state finances.
Senate rules do provide for the dual referral of bills that have a significant fiscal impact. However, the rules clearly state that those bills must first go to the substantive committee (in this case, Labor and Industrial Relations), and only if they advance from that committee should they go to the Finance Committee for the fiscal impact review. The rules of procedure were abused and violated in both the House and the Senate on Rep. Honey’s bill.
Why?
Unfortunately, it has a lot to do with game-playing and message-sending. The unemployment compensation stimulus issue has devolved, to a significant degree, into a Republican versus Democrat and Jindal versus Obama spat. Other bills were filed to do exactly what Rep. Honey’s unconstitutional amendment attempts to do.
However, each time those bills were scheduled for hearing in the House committee, the authors declined to have them considered in a free and open debate on their merits. Instead, the route of subterfuge and abuse of legislative rules was taken.
Governor Jindal’s opposition to taking this portion of the stimulus money has to do with future tax increases on struggling employers to pay for the added benefits once the federal money is gone. His objection is a valid one. Some claim that the stimulus money in question is needed to delay tax increases and benefit cuts that will occur as unemployment claims climb in the future.
That is a bogus argument. Those tax increases and benefit cuts will occur next January regardless of the stimulus money. What the changes in our unemployment compensation law will do is bring us closer to additional employer tax increases and unemployment benefit cuts in the future as the unemployment trust fund has to continue to pay for the new benefits once the stimulus money is used up.
There is room for honest debate about the unemployment compensation stimulus money. There shouldn’t be any tolerance for abuse of the process so that some folks can play games and send messages.
A recent ruckus in the state legislature has created a lot of anger and garnered national media attention. The incident involved a sneak attack amendment that Representative Avon Honey managed to get tacked onto one of his bills. The result was a 99-0 vote in the House of Representatives for a bill that, as amended, would enact changes in Louisiana’s unemployment compensation law to be eligible for unemployment compensation stimulus money approved by Congress.
There is more than meets the eye in this maneuver. The bill that was amended was on the “consent calendar” of the House agenda. That part of the agenda is reserved for bills that are totally non-controversial and can be considered quickly in order to speed up the legislative process. The original bill pertained to changes in the workers’ compensation law—not unemployment compensation.
Placing an unemployment compensation amendment on the bill violates the “dual object” provision in the Louisiana Constitution. That provision is designed to maintain order in the legislative process by preventing bills from being hijacked willy-nilly by amending them to have more than one objective.
Essentially, Representative Honey’s last second, unconstitutional amendment to his bill on a calendar reserved for totally non-controversial bills violated the legislative process on several levels, but that was just the opening act. When the bill arrived in the Senate, another game was played when it was referred to committee.
Under the Senate’s rules, the bill should have either not been referred due to its dual object flaw or, if referred, it should have gone to the Senate Labor and Industrial Relations Committee. Instead, the bill was referred to the Senate Finance Committee, presumably under the pretext that it has an impact on state finances.
Senate rules do provide for the dual referral of bills that have a significant fiscal impact. However, the rules clearly state that those bills must first go to the substantive committee (in this case, Labor and Industrial Relations), and only if they advance from that committee should they go to the Finance Committee for the fiscal impact review. The rules of procedure were abused and violated in both the House and the Senate on Rep. Honey’s bill.
Why?
Unfortunately, it has a lot to do with game-playing and message-sending. The unemployment compensation stimulus issue has devolved, to a significant degree, into a Republican versus Democrat and Jindal versus Obama spat. Other bills were filed to do exactly what Rep. Honey’s unconstitutional amendment attempts to do.
However, each time those bills were scheduled for hearing in the House committee, the authors declined to have them considered in a free and open debate on their merits. Instead, the route of subterfuge and abuse of legislative rules was taken.
Governor Jindal’s opposition to taking this portion of the stimulus money has to do with future tax increases on struggling employers to pay for the added benefits once the federal money is gone. His objection is a valid one. Some claim that the stimulus money in question is needed to delay tax increases and benefit cuts that will occur as unemployment claims climb in the future.
That is a bogus argument. Those tax increases and benefit cuts will occur next January regardless of the stimulus money. What the changes in our unemployment compensation law will do is bring us closer to additional employer tax increases and unemployment benefit cuts in the future as the unemployment trust fund has to continue to pay for the new benefits once the stimulus money is used up.
There is room for honest debate about the unemployment compensation stimulus money. There shouldn’t be any tolerance for abuse of the process so that some folks can play games and send messages.
Sunday, May 24, 2009
Focus on the Millages
Dan Juneau
There is a lot of debate going on at the State Capitol on the issue of property taxation. Some of it centers on raising the homestead exemption, some on freezing or capping tax assessments, and some on carving out special property tax safe harbors for relatively small groups of people. The property tax issue is a complex one and few understand exactly how their property tax bills work.
Individuals with concerns about property taxes should focus on one main aspect: millages. The millage amount is applied to the assessed valuation of taxpayers’ property to determine the amount of taxes owed: the higher the millages, the higher the tax bill.
How do millages go up? Taxpayers can vote to increase the millages in a tax election. If the tax proposition passes, the new millages are added to the next tax bill. Perhaps the most common way millages go up relates to something called roll-forwards. Every four years, residential property is reappraised by the local assessors. If values rise (which is common), the state constitution requires that millages must automatically be rolled back to a level that collects the same amount of tax revenue on the books before the reassessment of property. However, the constitution also gives local governing authorities the option to roll the millages forward to their previous levels—without a vote of the people—in order to collect more revenue. Millages also will rise significantly if the homestead exemption is increased. An increase in the exemption narrows the tax base and millages then automatically roll forward (with no vote required on anyone’s part) to higher levels.
Some of the proponents of raising the homestead exemption say it would result in a reduction of property taxes. That isn’t correct. It would simply result in a transfer of property taxes from some taxpayers to others. It would become a tax increase to many homeowners whose homes are valued higher than the exempted levels, to businesses that already pay almost 80 percent of the property taxes, and to renters whose landlords would pass on their tax increases in the form of higher rents.
According to the Tax Foundation, Louisiana ranks dead last (51st among the 50 states and the District of Columbia) in residential property taxes paid. At the same time, Louisiana has the highest homestead exemption in the nation ($75,000 of home value). The taxpayers who have seen their property tax bills go up a noticeable amount are looking at the wrong element of relief if they think raising the homestead exemption is the answer. Most of the increases are coming from the roll-forward of millages by local governments after reassessments are done.
Everyone benefits from public education, public safety, roads, water, and sewerage infrastructure improvements, libraries, and other public services. The individuals who are pushing for a higher homestead exemption think only a small group of taxpayers—primarily business owners and homeowners who are already paying more than their fair share of property taxes—should be the exclusive source for funding those necessary services. Others in the Legislature are carving out property tax exclusions for small groups of homeowners, not by giving them a direct credit for lower taxes on their tax bills, but by having someone else pay their taxes.
Some members of the Legislature appear hell-bent on making a bad situation worse when it comes to our property tax system. Unfortunately, our Governor is voicing his support for some of the legislation that would be the antithesis of the fiscal reform needed to improve tax fairness and the business climate of Louisiana.
There is a lot of debate going on at the State Capitol on the issue of property taxation. Some of it centers on raising the homestead exemption, some on freezing or capping tax assessments, and some on carving out special property tax safe harbors for relatively small groups of people. The property tax issue is a complex one and few understand exactly how their property tax bills work.
Individuals with concerns about property taxes should focus on one main aspect: millages. The millage amount is applied to the assessed valuation of taxpayers’ property to determine the amount of taxes owed: the higher the millages, the higher the tax bill.
How do millages go up? Taxpayers can vote to increase the millages in a tax election. If the tax proposition passes, the new millages are added to the next tax bill. Perhaps the most common way millages go up relates to something called roll-forwards. Every four years, residential property is reappraised by the local assessors. If values rise (which is common), the state constitution requires that millages must automatically be rolled back to a level that collects the same amount of tax revenue on the books before the reassessment of property. However, the constitution also gives local governing authorities the option to roll the millages forward to their previous levels—without a vote of the people—in order to collect more revenue. Millages also will rise significantly if the homestead exemption is increased. An increase in the exemption narrows the tax base and millages then automatically roll forward (with no vote required on anyone’s part) to higher levels.
Some of the proponents of raising the homestead exemption say it would result in a reduction of property taxes. That isn’t correct. It would simply result in a transfer of property taxes from some taxpayers to others. It would become a tax increase to many homeowners whose homes are valued higher than the exempted levels, to businesses that already pay almost 80 percent of the property taxes, and to renters whose landlords would pass on their tax increases in the form of higher rents.
According to the Tax Foundation, Louisiana ranks dead last (51st among the 50 states and the District of Columbia) in residential property taxes paid. At the same time, Louisiana has the highest homestead exemption in the nation ($75,000 of home value). The taxpayers who have seen their property tax bills go up a noticeable amount are looking at the wrong element of relief if they think raising the homestead exemption is the answer. Most of the increases are coming from the roll-forward of millages by local governments after reassessments are done.
Everyone benefits from public education, public safety, roads, water, and sewerage infrastructure improvements, libraries, and other public services. The individuals who are pushing for a higher homestead exemption think only a small group of taxpayers—primarily business owners and homeowners who are already paying more than their fair share of property taxes—should be the exclusive source for funding those necessary services. Others in the Legislature are carving out property tax exclusions for small groups of homeowners, not by giving them a direct credit for lower taxes on their tax bills, but by having someone else pay their taxes.
Some members of the Legislature appear hell-bent on making a bad situation worse when it comes to our property tax system. Unfortunately, our Governor is voicing his support for some of the legislation that would be the antithesis of the fiscal reform needed to improve tax fairness and the business climate of Louisiana.
Tuesday, May 19, 2009
The Champagne of the Hydrocarbons
05/15/2009
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Wednesday, May 13, 2009
The “Louisiana Way”
Dan Juneau
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Tuesday, April 14, 2009
Guaranteeing The Guarantees
04/03/2009
Occasionally you hear things that you find hard to believe. That happened recently when I heard the 44th President of the United States giving a government guarantee for the warranties of cars purchased from General Motors and Chrysler. It was the perfect metaphor for the unparalleled intrusion of government into the marketplace that accelerated with the 43rd President's bailout of financial institutions deemed "too big to fail." It is now at warp speed with the policies of the current administration. Our federal government is now favoring certain companies over others-both in the financial sector and the automobile industry. These policies are ripe for conflict of interest, cronyism, and more manifestations of the cruel law of unintended consequences.
Guaranteeing the automotive warranties is perhaps a symbol for the new approach to governance in America. The federal government is lining up a bevy of "guarantees" that, if enacted, would significantly change our social compact.
One of the "guarantees" is in health care. President Obama and many of his allies in Congress want to move to a universal health care system in which every American is guaranteed health care coverage. While the plan is not designed to be a "single payer" system with the federal government making all of the payments for (and many of the decisions regarding) health care procedures, it could eventually default into such a system. The cost for the health care plan the president advocates would be enormous. Greatly expanding health care coverage will place escalating demands on the providers within the system. When costs rise (and they will), the government no doubt will employ the same "cost saving" measure it uses for Medicare and Medicaid: reducing the amount of compensation paid to providers. That would likely drive more providers out of the system and could result in rationed care.
President Obama plans to raise the money for his health care initiative from a huge "hidden" tax on carbon emissions. His "cap and trade" approach would have the federal government "guarantee" success in the fight against "manmade" global warming by limiting the amount of carbon dioxide emissions permitted and taxing those that exceed the limits. The president and his congressional supporters, disregard the fact that the amount of atmospheric warming has only risen 0.4 of a degree centigrade in the last 100 years and none in the last 11. They are on a jihad that could cost the U.S. economy as much as $1.9 trillion if this plan is implemented. The effect on jobs and economic growth would be so damaging that even many members of the "tax and spend" crowd in Congress are starting to put the brakes on this idea.
President Obama and many in Congress are pursuing a goal of "guaranteeing" a comfortable life for every citizen of the U.S. In their scenario, the government would see to it that every American will have a good job, a good education, high quality health care and a sound retirement. That is a noble goal that is easier to promote than to accomplish. Historically, those ends are achieved by hard work, a diligent approach to studies and saving for the future. Our leaders in Washington should perhaps eschew the temptation to promise so many guarantees and instead concentrate on making the massive behemoth of the federal government do less and do it much better for the folks who pay dearly to finance it. Promises quickly turn empty fast when the models that deliver them don't work and the cost for providing them brings with it the specter of fiscal insolvency.
Occasionally you hear things that you find hard to believe. That happened recently when I heard the 44th President of the United States giving a government guarantee for the warranties of cars purchased from General Motors and Chrysler. It was the perfect metaphor for the unparalleled intrusion of government into the marketplace that accelerated with the 43rd President's bailout of financial institutions deemed "too big to fail." It is now at warp speed with the policies of the current administration. Our federal government is now favoring certain companies over others-both in the financial sector and the automobile industry. These policies are ripe for conflict of interest, cronyism, and more manifestations of the cruel law of unintended consequences.
Guaranteeing the automotive warranties is perhaps a symbol for the new approach to governance in America. The federal government is lining up a bevy of "guarantees" that, if enacted, would significantly change our social compact.
One of the "guarantees" is in health care. President Obama and many of his allies in Congress want to move to a universal health care system in which every American is guaranteed health care coverage. While the plan is not designed to be a "single payer" system with the federal government making all of the payments for (and many of the decisions regarding) health care procedures, it could eventually default into such a system. The cost for the health care plan the president advocates would be enormous. Greatly expanding health care coverage will place escalating demands on the providers within the system. When costs rise (and they will), the government no doubt will employ the same "cost saving" measure it uses for Medicare and Medicaid: reducing the amount of compensation paid to providers. That would likely drive more providers out of the system and could result in rationed care.
President Obama plans to raise the money for his health care initiative from a huge "hidden" tax on carbon emissions. His "cap and trade" approach would have the federal government "guarantee" success in the fight against "manmade" global warming by limiting the amount of carbon dioxide emissions permitted and taxing those that exceed the limits. The president and his congressional supporters, disregard the fact that the amount of atmospheric warming has only risen 0.4 of a degree centigrade in the last 100 years and none in the last 11. They are on a jihad that could cost the U.S. economy as much as $1.9 trillion if this plan is implemented. The effect on jobs and economic growth would be so damaging that even many members of the "tax and spend" crowd in Congress are starting to put the brakes on this idea.
President Obama and many in Congress are pursuing a goal of "guaranteeing" a comfortable life for every citizen of the U.S. In their scenario, the government would see to it that every American will have a good job, a good education, high quality health care and a sound retirement. That is a noble goal that is easier to promote than to accomplish. Historically, those ends are achieved by hard work, a diligent approach to studies and saving for the future. Our leaders in Washington should perhaps eschew the temptation to promise so many guarantees and instead concentrate on making the massive behemoth of the federal government do less and do it much better for the folks who pay dearly to finance it. Promises quickly turn empty fast when the models that deliver them don't work and the cost for providing them brings with it the specter of fiscal insolvency.
Wednesday, April 1, 2009
Why We Need Local School Board Reform
03/27/2009
Louisiana has about 700 local school board members across the state. Local school boards are charged with establishing policy that results in quality education for students and they are the stewards of hundreds of millions of tax dollars collected for schools. In January, the national education journal Education Week published its annual "Quality Counts" issue, wherein states are ranked according to the journal's assessment of various educational quality indicators. Louisiana's nationally recognized accountability program ranked high, coming in at number two in the nation. Also as expected, our student achievement ranking was one of the lowest in the U.S., coming in at number 47. Soon, almost one-third (500) of Louisiana's public schools will be considered academically failing.
Quality public education is the key to economic development. There is a huge disconnect between state law and policy and implementation at the local level, where education reform really must occur to be effective. Implementation falls directly into the hands of local school boards. Though some boards operate efficiently and are student-focused, many are bogged down in the micromanagement of their district's day-to-day operations, leaving student achievement behind as a priority issue.
Last year, Rep. Steve Carter approached LABI and other groups to discuss a local school board reform legislative package he was considering introducing during the next legislative session. This coalition began to work with Rep. Carter and the result is four bills that attempt to re-focus school boards on the mission of improving student academic achievement. The bills would:
This legislation will in no way affect board members who do not try to influence hiring and firing. Currently, accountability exists at every level of public education except the school board level. Students are accountable every time they take a LEAP or GEE test. Teachers are being held to ever higher standards, from their university training to their performance in the classroom. Schools receive report cards and districts receive scores.
These bills do not strip elected members from important governance functions, including setting standards and policy, and engaging in procurement. They have taxing authority and spend the local, state and federal tax dollars entrusted to them. These bills are not about blame but, rather, about trying to be the best we can be. It's about being thorough at every level. Nothing in these bills stops "good" school boards from continuing their good work. It's an important step to Louisiana's economic development efforts and providing better educational opportunities for students.
Brigitte Nieland, Vice President and Council Director for LABI's Education and Workforce Development Council, contributed to this column.production and consumption of hydrocarbons
in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Louisiana has about 700 local school board members across the state. Local school boards are charged with establishing policy that results in quality education for students and they are the stewards of hundreds of millions of tax dollars collected for schools. In January, the national education journal Education Week published its annual "Quality Counts" issue, wherein states are ranked according to the journal's assessment of various educational quality indicators. Louisiana's nationally recognized accountability program ranked high, coming in at number two in the nation. Also as expected, our student achievement ranking was one of the lowest in the U.S., coming in at number 47. Soon, almost one-third (500) of Louisiana's public schools will be considered academically failing.
Quality public education is the key to economic development. There is a huge disconnect between state law and policy and implementation at the local level, where education reform really must occur to be effective. Implementation falls directly into the hands of local school boards. Though some boards operate efficiently and are student-focused, many are bogged down in the micromanagement of their district's day-to-day operations, leaving student achievement behind as a priority issue.
Last year, Rep. Steve Carter approached LABI and other groups to discuss a local school board reform legislative package he was considering introducing during the next legislative session. This coalition began to work with Rep. Carter and the result is four bills that attempt to re-focus school boards on the mission of improving student academic achievement. The bills would:
- Take the profit out of local school board service - local school board members would be prohibited from being able to participate in local district health insurance plans (in 1996 they were prohibited from participating in retirement plans). Further, members may currently receive up to $800 per month in compensation. This bill would limit pay to $200 per month, plus expenses.
- Institute Term Limits - local school board members would be subject to the same term limits as BESE, the State Legislature, and many other boards–three four year terms. The goal of this legislation is to shake up the entrenched status quo that exists in some districts and encourage new citizens to get involved in education reform.
- Define the roles of the board and the superintendent - this bill seeks to get members out of hiring, firing and transferring school employees and creates penalties for those who violate this law. The bill also would require a two-thirds majority of school board members to hire and fire a superintendent.
- Tighten the Nepotism Law - tightens the law regarding the employment of superintendents' immediate family members.
This legislation will in no way affect board members who do not try to influence hiring and firing. Currently, accountability exists at every level of public education except the school board level. Students are accountable every time they take a LEAP or GEE test. Teachers are being held to ever higher standards, from their university training to their performance in the classroom. Schools receive report cards and districts receive scores.
These bills do not strip elected members from important governance functions, including setting standards and policy, and engaging in procurement. They have taxing authority and spend the local, state and federal tax dollars entrusted to them. These bills are not about blame but, rather, about trying to be the best we can be. It's about being thorough at every level. Nothing in these bills stops "good" school boards from continuing their good work. It's an important step to Louisiana's economic development efforts and providing better educational opportunities for students.
Brigitte Nieland, Vice President and Council Director for LABI's Education and Workforce Development Council, contributed to this column.production and consumption of hydrocarbons
in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Louisiana: The Energy-Less State
President Obama’s recently-released budget details two things: where the Administration wishes to go and how it will pay for it.
In Louisiana and other energy-producing and consuming states, alarms are sounding, because the proposed budget could well be the end of economic vitality as we know it. Louisiana has long been called “The Energy State,” with the oil and gas industry providing state and local governments billions of dollars and creating thousands upon thousands of jobs.
But, in an attempt to chart a totally new energy course for the nation, the FY 2010 federal budget, called “A New Era of Responsibility Renewing America’s Promise,” is simply a plan to destroy the nation’s domestic oil and gas industry. While calling on the country to reduce its dependence on foreign oil to assure national security, the Obama Administration proposes to eliminate the tools that have been given to our domestic industry to seek and find oil and gas here at home.
The new budget proposes at least $31.5 billion in taxes and fees from the oil and gas companies over the next decade to pay for its “transition to a clean economy.” No longer will intangible drilling costs be expensed—that means there will be no more available capital investment for high-risk drilling.
No longer will wells be depreciated. No longer will credit be given for wells that produce only small amounts of oil and gas or for enhanced oil recovery projects. Gone is the manufacturing tax deduction. What the industry will get is a new 13 percent excise tax on production in the Gulf of Mexico.
Proponents of the plan point to industry profits in recent years; however, they totally ignore current realities. Take a look at Louisiana’s current budget and budget proposals for next year to see those realities. When oil topped $100 a barrel, the state of Louisiana amassed hundreds of millions of dollars in surpluses. When the price dropped, what happened? Budgets got slashed.
The oil and gas industry responded similarly—when the price for oil and gas dropped, it stopped investing. What was thought to be a great boon to the economy of north Louisiana and the state as a whole, when Haynesville Shale leasing was at its peak last year, has now slowed to a trickle.
This downturn in oil exploration and production has occurred despite the fact that the industry currently receives the federal incentives and more favorable tax treatment. What will be the effect of eliminating those incentives plus adding even more tax burdens on the industry under the new federal taxing plan? For Louisiana, investment in oil and gas would likely drop by $6 billion a year, the State General Fund would drop by another $2.3 billion a year, and unemployment would probably exceed 10 percent.
At the other end of the “double whammy” are Louisiana’s individuals, businesses, and industries. These are the folks that consume the oil and gas and electricity. The proposed budget hits them too, with what’s called “cap and trade” with an estimated national impact of $150 billion in increased energy costs.
So, where are we going and how will we pay for it? We’re headed toward what the U. S. Department of Energy calls “a low-carbon economy” paid for by taxes on our oil and gas consumers and producers. Though “a low-carbon economy” may be a long-term Administration goal, it will be a short-term reality in Louisiana. The combined effect of the taxes on Louisiana’s producers and consumers will assure that there will be much less production and consumption of hydrocarbons in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
In Louisiana and other energy-producing and consuming states, alarms are sounding, because the proposed budget could well be the end of economic vitality as we know it. Louisiana has long been called “The Energy State,” with the oil and gas industry providing state and local governments billions of dollars and creating thousands upon thousands of jobs.
But, in an attempt to chart a totally new energy course for the nation, the FY 2010 federal budget, called “A New Era of Responsibility Renewing America’s Promise,” is simply a plan to destroy the nation’s domestic oil and gas industry. While calling on the country to reduce its dependence on foreign oil to assure national security, the Obama Administration proposes to eliminate the tools that have been given to our domestic industry to seek and find oil and gas here at home.
The new budget proposes at least $31.5 billion in taxes and fees from the oil and gas companies over the next decade to pay for its “transition to a clean economy.” No longer will intangible drilling costs be expensed—that means there will be no more available capital investment for high-risk drilling.
No longer will wells be depreciated. No longer will credit be given for wells that produce only small amounts of oil and gas or for enhanced oil recovery projects. Gone is the manufacturing tax deduction. What the industry will get is a new 13 percent excise tax on production in the Gulf of Mexico.
Proponents of the plan point to industry profits in recent years; however, they totally ignore current realities. Take a look at Louisiana’s current budget and budget proposals for next year to see those realities. When oil topped $100 a barrel, the state of Louisiana amassed hundreds of millions of dollars in surpluses. When the price dropped, what happened? Budgets got slashed.
The oil and gas industry responded similarly—when the price for oil and gas dropped, it stopped investing. What was thought to be a great boon to the economy of north Louisiana and the state as a whole, when Haynesville Shale leasing was at its peak last year, has now slowed to a trickle.
This downturn in oil exploration and production has occurred despite the fact that the industry currently receives the federal incentives and more favorable tax treatment. What will be the effect of eliminating those incentives plus adding even more tax burdens on the industry under the new federal taxing plan? For Louisiana, investment in oil and gas would likely drop by $6 billion a year, the State General Fund would drop by another $2.3 billion a year, and unemployment would probably exceed 10 percent.
At the other end of the “double whammy” are Louisiana’s individuals, businesses, and industries. These are the folks that consume the oil and gas and electricity. The proposed budget hits them too, with what’s called “cap and trade” with an estimated national impact of $150 billion in increased energy costs.
So, where are we going and how will we pay for it? We’re headed toward what the U. S. Department of Energy calls “a low-carbon economy” paid for by taxes on our oil and gas consumers and producers. Though “a low-carbon economy” may be a long-term Administration goal, it will be a short-term reality in Louisiana. The combined effect of the taxes on Louisiana’s producers and consumers will assure that there will be much less production and consumption of hydrocarbons in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Saturday, March 21, 2009
A Two-Trillion Dollar Mistake?
03/20/2009
One of the crucial elements of President Obama's legislative agenda is his "cap and trade" initiative that would limit carbon emissions and impose a huge indirect tax on them. In the president's budget outline submitted a few weeks ago, he estimated that some $680 billion in federal revenue would be raised by the proposal over the next eight years. Apparently, his advisors are now admitting that cost estimate is woefully low. In a briefing to U.S. Senate staffers recently, an Obama administration representative put the figure at a whopping $1.9 trillion.
This huge new revenue stream doesn't simply drop from the blue into the treasury. It will come from the pocket of businesses and consumers who use carbon-based energy-and that includes almost everyone.
The Tax Foundation, a Washington, D.C. tax policy think tank, recently completed an analysis of the potential impact of "cap and trade" legislation. Its findings are eye-opening:
"In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under 25 and over 75 years, those in southern states, and single parents with dependent children…. Depending on how the system is structured, cap and trade could reduce U.S. employment by 965,000 jobs, household earnings by $37.8 billion, and economic output by $136 billion per year or roughly $1,145 per household. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households, and would not represent a 'tax free' way to reduce green house gas emissions."
Revenue from cap and trade legislation figures prominently into the president's future spending plans. It is the principal source of funding for his "middle class" tax cut proposal and increased spending on renewable energy sources. Some skeptics would argue that the Obama administration knew all along that its estimates on cap and trade revenue were grossly understated and they were relying on a much larger revenue amount from it to pay for additional trillions of dollars in new spending proposals.
What Team Obama may not be factoring in is the impact that a not-so-hidden tax will have in a weak economy. If the cap and trade price tag is closer to the $1.9 trillion estimate, consumers are going to riot when those higher costs are passed on to them at a time when wages are stagnant and job security is ebbing.
From a business standpoint, the results could be devastating. Congress can impose carbon emission taxes, fees, and assessments on U.S. companies, but it can't impose them on their foreign competitors. That means American industries and their workers could be at a competitive disadvantage with similar companies located in China, India, Mexico and other less developed nations. Quite simply, that means that the cost of doing business will be higher here, profitability will be lower, and economic growth will be hindered. If cap and trade legislation results in higher unemployment and lower profitability and stock prices for American businesses, no one's economic best interest will be served.
It is interesting that the justification for imposing such an onerous proposal is the claim by some in the scientific community that climate change, particularly in the form of global warming, is threatening the planet. Interestingly, the planetary temperature increase in the last century has been 0.4 degrees Centigrade and the earth has actually cooled since 2001. Congress should think long and hard before inflicting economic misery on families and businesses under the guise of rectifying a problem that may not exist to any threatening degree.
One of the crucial elements of President Obama's legislative agenda is his "cap and trade" initiative that would limit carbon emissions and impose a huge indirect tax on them. In the president's budget outline submitted a few weeks ago, he estimated that some $680 billion in federal revenue would be raised by the proposal over the next eight years. Apparently, his advisors are now admitting that cost estimate is woefully low. In a briefing to U.S. Senate staffers recently, an Obama administration representative put the figure at a whopping $1.9 trillion.
This huge new revenue stream doesn't simply drop from the blue into the treasury. It will come from the pocket of businesses and consumers who use carbon-based energy-and that includes almost everyone.
The Tax Foundation, a Washington, D.C. tax policy think tank, recently completed an analysis of the potential impact of "cap and trade" legislation. Its findings are eye-opening:
"In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under 25 and over 75 years, those in southern states, and single parents with dependent children…. Depending on how the system is structured, cap and trade could reduce U.S. employment by 965,000 jobs, household earnings by $37.8 billion, and economic output by $136 billion per year or roughly $1,145 per household. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households, and would not represent a 'tax free' way to reduce green house gas emissions."
Revenue from cap and trade legislation figures prominently into the president's future spending plans. It is the principal source of funding for his "middle class" tax cut proposal and increased spending on renewable energy sources. Some skeptics would argue that the Obama administration knew all along that its estimates on cap and trade revenue were grossly understated and they were relying on a much larger revenue amount from it to pay for additional trillions of dollars in new spending proposals.
What Team Obama may not be factoring in is the impact that a not-so-hidden tax will have in a weak economy. If the cap and trade price tag is closer to the $1.9 trillion estimate, consumers are going to riot when those higher costs are passed on to them at a time when wages are stagnant and job security is ebbing.
From a business standpoint, the results could be devastating. Congress can impose carbon emission taxes, fees, and assessments on U.S. companies, but it can't impose them on their foreign competitors. That means American industries and their workers could be at a competitive disadvantage with similar companies located in China, India, Mexico and other less developed nations. Quite simply, that means that the cost of doing business will be higher here, profitability will be lower, and economic growth will be hindered. If cap and trade legislation results in higher unemployment and lower profitability and stock prices for American businesses, no one's economic best interest will be served.
It is interesting that the justification for imposing such an onerous proposal is the claim by some in the scientific community that climate change, particularly in the form of global warming, is threatening the planet. Interestingly, the planetary temperature increase in the last century has been 0.4 degrees Centigrade and the earth has actually cooled since 2001. Congress should think long and hard before inflicting economic misery on families and businesses under the guise of rectifying a problem that may not exist to any threatening degree.
Thursday, March 5, 2009
UC and the Stimulus Package
On February 17th, President Obama signed what is commonly referred to as the "stimulus package." It contains three provisions designed to increase unemployment compensation (UC) payments and provide incentives for states to expand the number of individuals eligible for these benefits. There has been a lot of discussion in the media about these provisions, and it is important to understand how they impact Louisiana.
The first provision allows claimants to continue to receive Emergency UC (EUC) benefits in addition to the six months of benefits already provided under our law. The funding comes from federal general revenues. Some 6,000 Louisiana claimants are receiving EUC benefits, which will expire at the end of this year.
A second provision creates a $25 weekly benefit that every Louisiana claimant will get through June 30, 2010. This additional benefit is also appropriated from federal general revenues. Louisiana is among a handful of states that has a minimum weekly benefit amount of $25 or less. The extra $25 per week will result in some low-wage workers receiving more in UC than they earned prior to becoming unemployed, which could discourage some individuals from actively seeking work.
The final provision, and the one that is generating most of the controversy, would transfer pro-rata shares of $7 billion to states from federal UC taxes paid exclusively by employers. States will receive this money in exchange for enacting or maintaining certain UC laws on their books.
To obtain its portion of this $7 billion, Louisiana must enact a more costly "alternative base period" calculation of benefits, which only 18 states-none in the south-have chosen to voluntarily put in their laws. Louisiana must also adopt at least two of the following provisions:
1.
Individuals shall not be denied benefits because they refuse to accept or actively search for full-time work.
2.
Individuals shall not be disqualified from benefits if they quit work for a "compelling family reason" over which the employer has no control.
3.
Individuals will receive an additional six months of benefits if they enroll in state-approved or federal Workforce Investment Act training.
4.
Individuals will receive dependents allowances of at least $15 per dependent.
It is important to note that, as the stimulus package was moving through Congress, an amendment was proposed to give states this money without the strings attached. However, the amendment was rejected because the leadership in Congress insisted that these permanent benefit expansions had to be part of any additional distribution to the states.
The purpose of our federal/state UC system has always been to provide assistance to workers who lose their jobs because of what happens at the workplace and not at home, and who genuinely desire to rejoin the workforce. Adoption of the expensive expansions in the stimulus package would constitute a significant departure from this.
One should also consider the impact of such changes on Louisiana's unemployment trust fund. The business community has fought for decades to protect the fund's solvency in order to provide benefits for deserving claimants. Enactment of the benefit expansions would jeopardize it's future solvency. If the fund declines, lower benefits for all of Louisiana's unemployed and higher state UC taxes for its employers will kick in. So, while a new group of individuals would get benefits, the unemployed already eligible might see their benefits reduced.
This is not free money. It comes at a price. Some say Louisiana should take it anyway. The fact is that the cost is too dear-for employers and the unemployed alike.
The first provision allows claimants to continue to receive Emergency UC (EUC) benefits in addition to the six months of benefits already provided under our law. The funding comes from federal general revenues. Some 6,000 Louisiana claimants are receiving EUC benefits, which will expire at the end of this year.
A second provision creates a $25 weekly benefit that every Louisiana claimant will get through June 30, 2010. This additional benefit is also appropriated from federal general revenues. Louisiana is among a handful of states that has a minimum weekly benefit amount of $25 or less. The extra $25 per week will result in some low-wage workers receiving more in UC than they earned prior to becoming unemployed, which could discourage some individuals from actively seeking work.
The final provision, and the one that is generating most of the controversy, would transfer pro-rata shares of $7 billion to states from federal UC taxes paid exclusively by employers. States will receive this money in exchange for enacting or maintaining certain UC laws on their books.
To obtain its portion of this $7 billion, Louisiana must enact a more costly "alternative base period" calculation of benefits, which only 18 states-none in the south-have chosen to voluntarily put in their laws. Louisiana must also adopt at least two of the following provisions:
1.
Individuals shall not be denied benefits because they refuse to accept or actively search for full-time work.
2.
Individuals shall not be disqualified from benefits if they quit work for a "compelling family reason" over which the employer has no control.
3.
Individuals will receive an additional six months of benefits if they enroll in state-approved or federal Workforce Investment Act training.
4.
Individuals will receive dependents allowances of at least $15 per dependent.
It is important to note that, as the stimulus package was moving through Congress, an amendment was proposed to give states this money without the strings attached. However, the amendment was rejected because the leadership in Congress insisted that these permanent benefit expansions had to be part of any additional distribution to the states.
The purpose of our federal/state UC system has always been to provide assistance to workers who lose their jobs because of what happens at the workplace and not at home, and who genuinely desire to rejoin the workforce. Adoption of the expensive expansions in the stimulus package would constitute a significant departure from this.
One should also consider the impact of such changes on Louisiana's unemployment trust fund. The business community has fought for decades to protect the fund's solvency in order to provide benefits for deserving claimants. Enactment of the benefit expansions would jeopardize it's future solvency. If the fund declines, lower benefits for all of Louisiana's unemployed and higher state UC taxes for its employers will kick in. So, while a new group of individuals would get benefits, the unemployed already eligible might see their benefits reduced.
This is not free money. It comes at a price. Some say Louisiana should take it anyway. The fact is that the cost is too dear-for employers and the unemployed alike.
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